The sector has been seeking a rebate on all the embedded taxes paid by the value chain, including those on diesel, electricity, fertilisers for cotton and the like.

Chennai: Fulfilling a long-pending demand of the textile sector, the government has introduced a new scheme to rebate state and central embedded taxes. This will make Indian apparels and made-ups more competitive in the international market at a time when the exports are shrinking year after year. The government has also brought down the hank yarn obligation for spinning mills from 40 per cent to 30 per cent.

The sector has been seeking a rebate on all the embedded taxes paid by the value chain, including those on diesel, electricity, fertilisers for cotton and the like. These taxes increase the cost of apparels and made-ups by around 6 per cent on an average. These taxes are not refunded for the export sector and that makes Indian textile products less competitive in the international market.

The apparel sector has been enjoying Rebate of State Levies (RoSL), which takes care of the embedded state taxes. The new scheme will replace the older one and include the central taxes as well.

“The government has not announced the rebate rates yet, though we have asked for 6 per cent. RoSL for made-ups and apparels was 2 per cent. We had also asked the government to introduce the scheme for yarn and fabric. But that has not been approved,” said Sanjay Jain, Chairman of the Confederation of Indian Textile Industry.

The Tirupur Exporters Association (TEA) hailed the Rebate of State and Central Taxes and Levies (RoSCTL). Reacting to the notification issued by the Textiles Ministry on Thursday, TEA President Raja M Shanmugham said the new RoSCTL rate has come at a time when the knitwear garment-exporting units were under pressure on pricing and stiff competition from the countries like Vietnam, Bangladesh, Cambodia, Indonesia, Sri Lanka and Pakistan apart from China.

As per a statement by the government, “The Cabinet decision provides for a scheme to rebate all embedded state and central taxes/levies for apparel and made-ups which have a combined share of around 56 per cent in India’s textile export basket. Rebate of taxes/levies has been permitted through an IT-driven scrip system at notified rates,’ it said.

The government has also reduced the hank yarn obligation for spinning mills from 40 per cent to 30 per cent. This too has been long-pending demand, considering the continuous decline of handlooms. In order to protect the handloom sector, the government had made it mandatory for the mills to produce certain percentage of yarns for it.